Appraisal disappointing? You have options, according to the Appraisal Institute.
“Homebuyers and sellers should first understand what an appraisal is and how it’s used,” says Jim Amorin, president and acting CEO of the Appraisal Institute. “Real estate appraisals for mortgage finance applications are prepared for the bank or financial institution so they can better understand the collateral risk in making the loan. This can be confusing, because homebuyers typically pay for the appraisal and receive a copy of it.”
In some cases, the appraisal may not match the contract price—but just because an appraisal comes in below (or above) the listing or contract price doesn’t mean it’s flawed, Amorin says. The agreed-upon contract price may be above market value, for example. In those situations, the buyer and seller often renegotiate the contract at more favorable or balanced terms.
Content Square 1.Homebuyers should ask their lender for the qualifications of the appraiser, including whether they are designated by a professional association like the Appraisal Institute, says Amorin. A qualified and competent appraiser knows how to conduct a thorough market analysis and make appropriate adjustments.
Homebuyers also can ask whether the appraiser is directly engaged by the bank or whether the bank utilizes an appraisal management company, and what their procedures are for engaging qualified appraisers.
“The best way for consumers to combat potential problems with appraisals is to ensure the appraiser hired by their lender is highly qualified and competent,” Amorin says. “Consumers have every right to demand the use of a highly qualified appraiser, someone with field experience in their market and knowledge and experience to handle the assignment properly.”
Content Square 2.Contrary to incorrect interpretations of appraiser independence requirements, appraisers welcome information that would assist the development of credible assignment results,” says Amorin. If lender policies permit, consumers can accompany appraisers when conducting the property inspection and may provide the appraiser with any information they consider important.
Amorin suggests consumers ask their lender for permission to do so, and confirm the appointment. Consumers should also take note of whether an adequate inspection is performed. Did the appraiser spend enough time at the property to observe important features or improvements or potential problems?
Homebuyers should take advantage of their right to obtain a copy of the appraisal report,” Amorin says. Even though the appraisal is ordered to help assess lender collateral risk, buyers are entitled to a copy of the appraisal report. Federal regulations require lenders to provide property buyers with free copies of appraisal reports no later than three days before the loan closes.
Content Square 3.Although appraisal review is best performed by qualified appraisers, consumers should examine the appraisal for potential deficiencies, says Amorin. According to “Appraising the Appraisal: The Art of Appraisal Review,” common errors in appraisals include: misuse of adjustments to comparables; disregarding special financing and concessions; or miscalculation of gross living area (GLA).
Amorin suggests consumers ask themselves:
Source: Appraisal Institute
When trying to decide whether or not to invest in a home improvement project prior to sale, the most important consideration is return-on-investment (ROI). Some projects will simply cost more to complete than they’ll pay you back in equity.
Here are six home improvement projects to avoid because they yield a poor ROI, and some might even turn off future buyers.
Remodeling a home office
If your home office is looking dated and making you unproductive, it’s important to make some updates to keep it functional and inspiring. But don’t go for a complete overhaul. It’s unlikely to pay-off, especially if you borrow usable space from a bedroom, living room, or garage. On average, home office remodels recoup only about 50 percent of the money you spend on them. Go ahead and add some nice portable elements that can move with you when you sell the house — like a modern steel desk, ergonomic chair and area lighting — but don’t knock down any walls.
Installing a pool
Unless you live in a state where pools are the norm, like Florida or Arizona, don’t expect to recoup the money — anywhere from $10,000 to $50,000 — that you’ll spend on installing a pool. Many buyers are turned off by the thought of having to maintain a pool: constant skimming, filtering, PH-balancing, heating, repairing, and winterizing. Typically, you’ll only recoup about 30 percent of your investment in a pool. That’s not a very strong ROI for an amenity you may only use a few months a year depending on your location.
Installing a new roof
If your roof is falling apart, of course it needs to be replaced. But cedar shakes and clay tiles, while instantly transforming your house, probably won’t greatly inflate your sales price. Buyers consider a roof a bare necessity, not a luxury item that will motivate them to pay more. A fancy new roof doesn’t really add value to your home if the old roof was working fine in the first place. Focus instead on making necessary repairs to keep your current roof in shape and up to code. Plus, you’ll only recoup an average of 60 percent of your investment, depending on the type of shingle you choose.
Adding a new bathroom
Adding a new bathroom to your home sounds great in theory, but doesn’t pay-off in reality. It costs a large sum of money to add a new bathroom when you take into account the electrical, plumbing, flooring, and structural changes. And that doesn’t even count the appliances and decor you’ll need to make it functional. You could spend anywhere between $20,000 and $40,000 to create a basic bathroom and upwards of $70,000 for a top-of-the-line addition. At most, you’re looking at recouping maybe 60 percent in resale value. That’s not a great return for the time and treasure you’ll spend, so you’re probably better off focusing on simple updates and cosmetic changes throughout the rest of the house.
Adding a sunroom
Much like a pool, a sunroom addition sounds appealing, but it’s not a major selling point for the majority of homebuyers in most parts of the country. Since a sunroom is an addition, it’s an expensive project — usually between $10,000 and $20,000 — and it’s only useful if you enjoy lots of sunlight or are willing to add air conditioning to the space to make it more functional. On average, homeowners will only recoup about 50 percent of their investment with a sunroom addition. But, that number can drop dramatically if you live in an area with very little sunlight or extensive winters.
Making over-the-top improvements
When it comes to home improvements with the best ROI, better isn’t always more valuable. While transforming your vintage kitchen into a modern workspace will likely increase your home’s value, installing a top-of-the-line Viking refrigerator and professional-grade Wolf stove probably won’t pay off. Before your minor upgrade turns into a major renovation, ask yourself whether potential buyers in your area are likely to value and pay for luxury improvements. To get the best return on your investment, check local listings to see what the standard is in your area and then meet that standard, but don’t vastly exceed it.
As its' name suggests, a fixed-rate mortgage is the most stable loan. It offers a fixed interest rate for the entire length of the loan regardless of any economic fluctuations. This is the major benefit of a fixed-rate loan.
Conversely, the pros of a fixed-rate loan are (sometimes) outweighed by the cons because this type of loan is most likely to have a higher interest rate than most any other loan.
However, many people prefer the stability and predictability of a fixed-rate loan, and are willing to pay the price for this "peace of mind." Also, these rates can vary greatly among lenders, and depend mostly upon personal factors -- like a credit score.
I would recommend this type of loan for someone who has great-excellent credit, collateral, and particularly for someone looking to stay in their home for a long period of time.
Adjustable Rate Mortgage:
Generally referred to as an "ARM," this is also very much like its' name in that the interest rate of the mortgage will change over time. Each loan is different, but there is generally a period of time (generally 5 or 7 years) during which the interest rate will stay the same. After this time, the interest rate will be re-adjusted (usually) once a year. The differences in these loans are marked by the varying introductory period during which the rate does not change, and second, how often the rate will be changed.
Another variable in these loans is the "caps" put on the interest rate. Generally, there is an annual (or periodic) "cap," that stops the loan from going over a certain amount each time it's adjusted, and there can also be a lifetime cap on the entire amount of the loan.
While this might sounds like a risky game, it can be surprisingly beneficial. It often means a lower interest rate during the introductory period, and sometimes, for instance, over the last 7 or 8 years, because of the economy's down-turn, many ARM interest rates have gone down. At the same time, of course, if the economic climate were to change in the other direction, the rate would be most likely to rise.
Because of the savings during the initial period of the loan, I would recommend this type of loan to someone planning not to stay in a house for the entire length of their loan. Also, if you have a job or are in some way directly effected by certain economic conditions, this might make sense for you.
Interest Only Loans:
For the risk-takers out there... this is the loan for you! An interest only loan, again, like it sounds, means that, well, in the beginning, you will be paying only the interest on the loan. So, this means the initial payments will be lower than probably any other type of loan. It's very similar to an ARM loan, except that the transition from your "introductory period" to your "adjustable period" might hurt a little.
While it does afford many people the option of owning a home maybe sooner than they otherwise would be, it can mean a significant increase later down the line. So while you might save a good deal of money initially, none of the initial payments go toward the actual principal of the loan.
This is a great loan for someone who does not have a lot of income currently, but plans to have some in the future. For instance, if you are on a career track where you know you will be making more money in X amount of years, but are not yet. Or if you want to free up some cash for other investments... this is also a good choice. Also, another good loan for someone not planning to stay long in the house they are purchasing, or for someone planning to "flip" a house and make a profit.
Here is a list of most of the houses that have sold in Fredericksburg City since January 1, 2013. This is not a totally comprehensive list -- it is a list of 19 properties that I found to be of interest. There are 31 properties (that I know of) that have sold in the city this year, I just didn't include every single one.
Click on the address that's highlighted in blue, and it will take you to a more complete listing with a picture!
Leave me some comments!
1. 2148 Idlewild Boulevard
4 Bedrooms, 2.5 baths
Village of Idlewild
3,233 Square Feet
Sold on February 28, 2013 for $365,000.
2. 1212 Kenmore Avenue
4 Bedrooms, 2 full baths, 2 half baths
College Terrace/ Below the College
2,940 Square Feet
Sold on January 29, 2013 for $495,000.
3. 1501 Stafford Avenue
3 Bedrooms, 2 full baths
1,386 Square Feet
Sold on March 14, 2013 for 292,500
4. 309 Progress Street
2 Bedrooms, 2 full baths
1,308 Square Feet
Sold on January 24, 2013 for 193,000
5. 212 Braehead Drive
5 Bedrooms, 3.5 baths
1,989 Square Feet
Sold on January 16, 2013 for 189,900
6. 2105 Fall Hill Avenue
3 Bedrooms, 2 baths
1,523 Square Feet
Sold on February 22, 2013 for $249,900
7. 129 Kings Mill Drive
2 Bedrooms, 1.5 baths
1,200 Square Feet
Sold on January 10, 2013 for $99,900
8. 812 Daniel Street
4 Bedrooms, 1 bath
1,075 Square Feet
Sold February 25, 2013 for $249,900
9.1708 Beverly Lane
4 Bedrooms, 3.5 baths
3,708 Square Feet
Sold February 19, 2013 for $624,900
10. 1311 Franklin Street
4 Bedrooms, 3.5 Baths
Below the College
2,153 Square Feet
Sold on January 14, 2013 for $379,900
11. 1015 Martingale Court
4 Bedrooms, 3.5 Baths
2,850 Square Feet
Sold on February 28, 2013 for $322,000
12. 1228 Farrish Drive
3 Bedrooms, 2.5 Baths
Village of Idlewild
3,390 Square Feet
Sold on February 22, 2013 for $319,00
13. 1006 Brandon Drive
3 Bedrooms, 3 Full Baths
Villas of Snowden
2,856 Square Feet
Sold on February 25 for $334,900
14. 1615 Stafford Avenue
3 Bedrooms, 3 Full Baths
2,274 Square Feet
Sold on March 15, 2013 for $259,900
15. 122 Oak Street
2 Bedrooms, 1 Full Bath
884 Square Feet
Sold on March 18, 2013 for $121,000
16. 1609 Franklin Street
4 Bedrooms, 2 Full Baths
Below the College
2,114 Square Feet
Sold on February 1, 2013 for $469,500
Houses Sold By the Pates Team in 2013
1. 107 Caroline Street
3 bedrooms, 2.5 baths
1,794 Square Feet
Sold on January 18, 2013 for $485,000
2. 406 Greenbrier Court
3 Bedroom, 1 Full Bath, 2 Half Baths
1,320 Square Feet
Sold on March 15, 2013 for $159,900
3. 1317 Payne Street
3 Bedrooms, 2 Full Baths
1,178 Square Feet
Sold on February 15, 2013 for $249,000
1. Choosing an Agent
Choosing an agent is often a matter of finding someone you know, or someone that a friend refers you to. This is often the best way to find an agent, but here are some more things to consider.
1. Does the agent you're choosing know the area in which you are looking to buy? Too often, people list their homes with an agent who is a friend, but who lives and does most of their real estate business in a different area. For example, if you are looking to buy a home in Culpeper, an agent who specializes in Stafford County will probably not serve you best.
2. Another thing to consider is whether or not your agent understands you and your vision. The process of finding the right home is a difficult and time-consuming one, and it helps if your agent understands you, where you're coming from, and what you're looking for.
3. Most importantly, do you TRUST your agent? Real estate agents have occasionally given themselves a bad name for playing a self-serving role in their transactions. Make sure that you feel comfortable with your agent, and that you can trust their advice. There are many wonderful, loyal, and trustworthy agents out there, always trust your instincts, and it often pays to check up on an agent's reputation if possible.
When choosing an agent, the best place to start is with asking around your community for suggestions on agents to use or even not to use. When you've collected a few names, call a few agents and essentially interview them, even meet with them so you know you are making the right decision. The right agent can make all the difference in a real estate transaction, and it's a decision that should not be taken lightly!
Although I mention this in my previous article on why to use a realtor, it's important that you know that an agent's commission is almost always paid by the seller. Meaning that the extremely valuable services of a real estate agent generally come to the buyer at no cost, or sometimes very minimal cost. There is no reason for a buyer not to use an agent, as long as they can find an honest and competent one. And if you don't like the agent you've begun working with, you can find a new one. Just make sure that when signing an agreement with an agent, that you have an option to void the agreement with 24 hours notice.
2. Determine What You Are Looking For
Here are some things to sit down and think about, and discuss with anyone else who is a key player in this decision.
1. Of course, number one is How much can you afford? What monthly payments can you afford, and how much are you able to put down in a down payment?
2. What kind of area would you like to live in? Are you looking for lots of land with no nosy neighbors nearby? Do you love to be right in the middle of everything in a more urban setting? Love the suburbs? How important is it that you live near water?
3. Where do you work? If you commute, do you need to live near a commuter station? Do you need to live walking distance to your job because you love to ride a bike to work everyday? How far are you willing to drive to work everyday? etc.
4. What abous school systems? Are you willing to take your children out of their current schools? Do you want to live in a certain school district? (Although keep in mind that school district lines often change when there are multiple schools for each level.)
5. What kind of neighborhood do you see yourself in? Do you want to live amongst social neighbors? What types of dwellings would you like to see around you in your neighborhood?
6. SPECIFICS: How many people will be living in the house? How many rooms do you need? Bathrooms? Bedrooms? Outdoor space? Do you need a basement, an attic? Do you need a garage? Fenced in yard? Seperate living room and dining room? Are there any other requirements you have? Fireplaces? Flooring? Chances are, you won't find everything you want in one house, so you also need to decide how much you are willing to renovate.
Once you have made your list of wants and needs, determine which of your "wants" are dealbreakers, and which ones you could live without. Chances are, your perfect home just the way you want it, at the price you can afford, is not going to be easy to find, and compromises are almost always necessary.
After you have determined what you or you and your family want and need, it is time to sit down with your agent and discuss your list.
3. Mortgage Pre-Approval
Before an agent takes a buyer out to start house-hunting, it is essential that the client has gone through the pre-approval process.
Your agent can help you find a loan officer if you don't already have one, and a loan officer will get all of your financial information, run your credit, and give you a general idea about how much money you may be approved for on a mortgage.
This is so very important because if you are a buyer, and think you can afford a $450,000 house, and your agent shows you a few houses in that range, and then it turns out you only qualify for a mortgage loan of $300,000 -- well, when you then start to look at the lower priced houses, disappointment will most likely ensue.
Even if your agent doens't insist on this step, it is always, always a good idea to get a pre-approval before you start looking!
4. Previewing Houses
Once you have an idea of what you're looking for, your agent will look at their Multiple Listing Service. The Multiple Listing Service in Virginia, D.C., and Maryland is called MRIS. Every agent has their own system of finding matches for you. When you and your agent have decided which houses to view, you will usually need to give 24 hours notice for an appointment. You must have an agent with you in order to preview any listed properties (another reason why having an agent is essential!)
During this process, it's important to make note of what features you do or do not like in each house you preview to give your agent a better idea of what to show you and what not to show you in the future.
Once you've found a house you like, you will move to the next step-- making an offer.
5. Making an Offer to Purchase
When you've chosen the house that you want to put an offer on, you and your agent will sit down and write an "offer."
The price you choose to offer on a home will be based on several things, such as what you can afford to pay, what you feel the property is worth, whether or not there are other people interested in making offers on the property, and how long the house has been on the market. (A few examples)
When putting in an offer, a buyer will also be asked to put down what's known as an "earnest money deposit." This money will go into escrow, and is essentialy a financial commitment to buying the property. The appropriate amount for the earnest money deposit should be discussed with your agent, as each payment depends on the particulars of the situation.
Also, when writing an offer to purchase, a buyer will need to determine whether or not they are offering to pay the closing costs, or if they are going to ask the seller for some or all of closing costs.
CONTINGENCIES: Also, when making an offer to purchase, a buyer will add any contingencies they may need. For example, if the buyer is taking out a mortgage loan, they may need a financial contingency that can void the contract if the buyer is unable to get proper financing. The other common contingency, is a home inspection contingency. This gives the buyer the right to back out of a contract if any major problems are found with the house when it has been inspected, and the seller is unwilling to fix them. There are several other types of contingencies for different situations, but financial and home inspection contingencies are the most commonly used.
6. Negotiation and Contract Acceptance
Often, when a buyer gives the seller an offer to purchase, the seller will produce a counter-offer. Sometimes, the seller is asking for more closing costs or a higher price. The offers and counter-offers can sometimes go back and forth multiple times, and sometimes they are accepted with the first offer.
When the buyer and seller finally agree to the terms of a contract, they both sign off on the contract. They then have a ratified contract.
7. Getting a Mortgage Loan
Some buyers offer to pay cash for properties, and in that case, this step is irrelevant. However, most people need a loan when buying a property, and the mortgage loan becomes one of the most important pieces to the puzzle.
Shopping around for the right loan is important. Many lenders will offer you different types of services, and it pays to shop. This is another place where your agent can be very helpful in finding you some good options to look into.
With the current financial climate, loans are taking much longer than they used to, and loan applicants are expected to provide a great deal of their financial paperwork and information. A conventional loan generally takes 30-45 days for approval, and a VA or FHA loan often takes 45-60 days. This is important to consider when considering a closing date. Also, with the changes in loans these days, loan companies have become more competitive, and it pays to explore all your options -- mortgage lenders, mortgage loan brokers, financial institutions, private lenders, credit unions, and finance companies.
A lender will need to know your financial information like the amount you wish to borrow, your monthly income (pay stubs and W-2 forms), your account statements, a complete list of your assets, as well as a complete list of your debts.
When the lender has received this information they will need to verify these facts and run a credit report. They will then order an appraisal to be done on the property. This is a very important part of the process because the property will need to appraise for the amount it is being sold for in order for the loan to go through. If it doesn't, it doesn't necessarily mean that the deal is off, but it may mean that the buyer must put down a larger down payment.
After the appraisal, the lender will review your application and make a decision. If the loan is approved, the buyer will receive a loan commitment letter which states the mortgage amount, interest rate, and length of loan. The buyer should review it, sign it, and return it to the lender. If there was a financial contingency, it will then be removed. When this step is completed, the selling and listing agents can then set a date for settlement.
8. Home Inspection
Whether or not there is a home inspection contingency, most buyers want the home they are about to purchase inspected. The buyer has the right to choose their own inspector, and an agent can often be helpful in selecting the right inspector. When the inspection has been completed, the buyer will have access to the full report. If the buyer accepts the property as-is, then the deal proceeds unhindered.
If there are repairs that need to be made, that the buyer feels the seller should pay for, they will write up a list of requests. The seller will receive this list, and decide if they are willing to make all of the repairs, some of the repairs, or none of the repairs. If there is a home inspection contingency on the property, the buyer may generally back out of a contract if the seller is unwilling to meet the buyers' demands. If the buyer and seller can agree on what repairs will or will not be made, the home inspection contingency will then be removed (if there was one.) If not, the whole deal may stop here.
Some home inspections are for informational purposes only, and do not have any effect on the continuance of the sale.
Also at this juncture, a termite inspection may also be performed before the contract continues.
8. Preparing for Settlement
Now that all contingencies have been removed, it is time for the buyer to decide on a settlement attorney. An agent can be very helpful in giving options and advice on this decision.
Fire and Hazard Insurance: Most lenders will require a buyer to have fire and hazard insurance. They usually want at least a one-year policy, and they will require a receipt at settlement.
Title Insurance: Most lenders will also require a buyer to have title insurance which provides protections against any unforseen actions that threaten the buyers' claim over the title. When buying title insurance, there are several things to consider and it is best to consult both your settlement attorney and your insurance company.
9. Pre-Settlement Inspection
Known as a "walk-through," the pre-settlement inspection generally takes place on the day of closing. This is when the buyer (and usually their agent) walk through the house to make sure that the house is in the condition in which it is supposed to be. This is to ensure that all fixtures that were to convey are still in the property, all appliances are working correctly, and everything is in order.
When doing a walk-through, here are some suggestions:
1. Turn all light switches off and on.
2. Turn on and off all faucets, showers, flush toilets
3. Test stove burners, oven, test the disposal, run dishwasher, washer, dryer and if possible, make sure the heating and/or central air are working properly.
4. Essentially, try everything. Keys, fireplaces, etc.
Any problems with the house should be noted, and brought to the attention of the settlement attorney. The real estate agent, settlement attorney, the buyer, and seller will need to coordinate about any repairs that need to be made. More often than not, a walk-through does not produce major problems, but it is important to check the house thouroughly.
At settlement, there will be an attorney or title company representative who has been chosen by the buyer. Usually, the listing and selling brokers are present, as well as all of the owners and buyers. All paperwork will be explained by the settlement attorney, papers will be signed, and then hopefully the keys will be placed in the hands of the new owner!
Congratulations! If you have made it through all these steps, you are about to recognize all the joys of being a homeowner. Homeownership brings a person a lot of pride, and gives you a place to grow your roots. You now have the freedom to make the house you've bought into YOUR home.
However, the moving process can be a grueling one, and make sure to consult with your agent about the different options available to help you on Moving Day, and even options available to you like "packers." If you hate packing as much as I do... Sometimes, they are so worth the extra money!
The number one reason for a buyer to use a realtor, is that in nearly every situation, the seller pays the realtor a commission -- meaning that a buyer doesn't pay anything. In some situations, buyers have a small broker's fee to pay at closing, but usually, using an agent costs a buyer virtually no money.
After talking to many young first-time homebuyers, this was the number one reason why they didn't want to use an agent.
But, if that in itself is not enough of a reason, think about all the different aspects of buying a home. Looking at houses, and helping you to find the right one is only a small part of our job. We also hold your hand through what can be an extremely difficult process. We help you to get mortgage pre-approval, help you to write up an offer of purchase, negotiate on your behalf, and help get your contract ratified.
We work with you through a home inspection, help you find a settlement attorney, help discuss home insurance options, and a great agent helps with all of your other needs like getting your utilities set up, finding you a good moving company, and so much more.
But most importantly, an agent is an expert in real estate who is working for you, and representing your best interests at all times.
Finding a trustworthy agent is difficult, and the Pates name has come to mean honesty, reliability, and loyalty in the real estate business over the last three generations of Pates family realtors and brokers. Susan and Anne Morgan Pates have the combined features of experience, years of superior service, youthful enthusiasm, and an up to date understanding of the internet and how it can serve our clients.
Anne Morgan Pates
Anne Morgan Pates has worked in Real Estate and in Sales & Marketing since 2012. She currently runs her own Marketing business, FXBG Real Estate &.Small Business Marketing.